HE COM T P F T R Carole Keeton Strayhorn O O E L C L I Texas Comptroller of Public Accounts E F F R R O T E X A S 512/463-4000 512/463-4000 December 15, 2006 FAX: 512/463-4965 512/463-4965 P.O. BOX 13528 AUSTIN, TEXAS 78711-3528 The Honorable Rick Perry, Governor The Honorable David Dewhurst, Lieutenant Governor The Honorable Thomas R. Craddick, Speaker of the House Fellow Texans: In accordance with Article 4.73(a) of the Texas Insurance Code, I present herewith the first biennial report on the results of the implementation of a program establishing Premium Tax Credit for Investment in Certified Capital Companies (CAPCOs) for the period since program inception to January 1, 2006. This report provides information concerning the certification and investment activities of private venture capital companies formed to stimulate job creation and to increase the availability of growth capital for small busi- nesses located in the state. During 2005, ten Texas CAPCOs were certified to raise $200 million through the issuance of certified capital notes or “qualified debt instruments” to insurance companies. In return for their investments, 110 participating insurance companies will receive premium tax credits equal to 100 percent of the amount of their investments. This report includes the number, name, and amount of certified capital invested in each CAPCO; the amount each CAPCO has invested in qualified businesses as of January 1, 2006; the amount of tax credits granted for each year that credits have been granted; the renewal and reporting performance of each CAPCO; the size and industrial sector classification of qualified businesses receiving investment; the total number of jobs created and average wages paid for those jobs as a result of CAPCO investments; the total number of jobs retained and the average wages paid for those jobs as a result of CAPCO investments; and any CAPCOs that have been decerti- fied or failed to renew with the reason for any decertification. If you have any questions about this report, please contact Paul Ballard, Chief Executive Office of theT exas Treasury Safekeeping Trust Company, by e-mail at [email protected], by phone at 1-800-531-5441, extension 3-1870, or direct in Austin at 512/463-1870, or you can contact me directly at 512/463-4444. Sincerely, Carole Keeton Strayhorn Texas Comptroller c: Paul Ballard 2006 Biennial Certified Capital Companies Report Table of Contents Transmittal letter………………………………………………………………………………….…i Table of Contents..…………………………………………………………………………………..1 Reference to authorizing legislation and regulations………………………………………………..2 Certified Capital invested in each Certified Capital Company…………………………………… ..3 Investments in Qualified Businesses by Certified Capital Company……………………………….4 Schedule of Tax Credits granted for each year credits have been granted………………………….5 Renewal and reporting performance of each Certified Capital Company…………………………..6 Size and industrial sector classification of qualified businesses receiving investment……………..7 Total number of jobs created and retained and average salaries for those jobs …………….………8 Certified Capital Companies either decertified or non-renewing……………..………………..…...9 Exhibits……………………………………………………………………………………………..10 Reference to Authorizing Legislation and Regulations This report is issued in accordance with the statute for the CAPCO program which may be found in the Texas Insurance Code-Not Codified, Article 4.51-4.73. The statute is the product of Senate Bill 601 passed by the 2001 Legislature, as amended by House Bill 2425 passed by the 2003 Legislature. The regulations for the Texas Certified Capital Companies program are contained in the Texas Administrative Code at: TITLE 34.PUBLIC FINANCE Part 1. COMPTROLLER OF PUBLIC ACCOUNTS Chapter 3. TAX ADMINISTRATION Subchapter GG. INSURANCE TAX 34 TAC §3.833 1 Certified Capital Invested in each Certified Capital Company Amount of Certified Capital Invested in each CAPCO CAPCO Accent Texas Fund I, LP $23,412,844 Aegis Texas Venture Fund, LP $22,534,863 Enhanced Capital Texas Fund, LLC $23,412,844 Lonestar CAPCO Fund, LLC $8,600,000 Republic Holdings Texas, LP $4,975,230 Stonehenge Capital Fund Texas, LP $23,412,844 Texas ACP I, LP $23,412,843 Waveland NCP Texas Ventures, LP $23,412,844 Whitecap Texas Opportunity Fund, LP $23,412,844 Wilshire Texas Partners I, LLC $23,412,844 Total Invested in all CAPCOs $200,000,000 2 Investments in Qualified Businesses by Certified Capital Company Amount of Certified Capital CAPCO Names of Business Invested Accent Texas Fund I, LP Team Championship Intl $518,750 Accent Texas Fund I, LP Commericant $1,000,000 Accent Texas Fund I, LP Total $1,518,750 Aegis Texas Venture Fund, LP BizSupplies $3,200,000 Aegis Texas Venture Fund, LP Vuico $500,000 Aegis Texas Venture Fund, LP Team Championship Intl $135,000 Aegis Texas Venture Fund, LP Commerciant $1,000,000 Aegis Texas Venture Fund, LP Bynari $100,000 Aegis Texas Venture Fund, LP Mobile Medical Technologies $10,000 Aegis Texas Venture Fund, LP Total $4,945,000 Republic Holdings Texas, LP Sweet Leaf Tea $746,248 Republic Holdings Texas, LP Mobley Oilfield Services $746,248 Republic Holdings Texas, LP Total $1,492,496 Texas ACP I, LP Quickoffice $749,998 Texas ACP I, LP Commerciant $500,000 Texas ACP I, LP Total $1,249,998 Whitecap Texas Opportunity Fund, LP HBH Systems I, LP $930,000 Whitecap Texas Opportunity Fund, LP Total $930,000 Wilshire Texas Partners I, LLC KJK Unlimited Corporation $2,000,000 Wilshire Texas Partners I, LLC Summit Systems $3,500,000 Wilshire Texas Partners I, LLC Fortress Data Management $3,250,000 Wilshire Texas Partners I, LLC Business Connect $3,200,000 Wilshire Texas Partners I, LLC Total $11,950,000 Grand Total $22,086,244 3 Schedule of Tax Credits Granted for each Year Credits have been Granted Legislation establishing premium tax credits authorized insurance companies that invested in Certified Capital Companies to begin utilizing their credits no earlier than 2009. The insurance companies were granted $200 million in available tax credits upon investment in qualified debt instruments during 2005. These premium tax credits may be used at a maximum rate of 25 percent per year. Anticipated utilization of premium tax credits by tax year: Tax Year Credits to be Utilized by Year 2009 ……………………. …..$50,000,000 2010 ……………………. …..$50,000,000 2011 ……………………. …..$50,000,000 2012 ……………………. …..$50,000,000 4 Renewal and Reporting Performance of each Certified Capital Company CAPCO Certification Renewal Annual Reporting Accent Texas Fund I, LP Renewed as of January 1, 2006 In Compliance Aegis Texas Venture Fund LP Renewed as of January 1, 2006 In Compliance Enhanced Capital Texas Fund, LP Renewed as of January 1, 2006 In Compliance Lonestar CAPCO Fund, LLC Renewed as of January 1, 2006 In Compliance Republic Holdings Texas LP Renewed as of January 1, 2006 In Compliance Stonehenge Capital Fund Texas, LP Renewed as of January 1, 2006 In Compliance Texas ACP I, LP Renewed as of January 1, 2006 In Compliance Waveland NCP Texas Ventures, LP Renewed as of January 1, 2006 In Compliance Whitecap Texas Opportunity Fund, LP Renewed as of January 1, 2006 In Compliance Wilshire Texas Partners I, LLC Renewed as of January 1, 2006 In Compliance 5 Size and Industrial Sector Classification of Qualified Businesses Receiving Investment Business Size Prior to Certified Capital Company Names of Business Investment Industrial Sector NAICS Team Championship Promoters of Sports events w/o Accent Texas Fund I, LP Intl <$1mm Facilities 711320 Wireless Communication Commericant <$1mm Equipment 33422 Internet Retail Sales & Office Aegis Texas Venture Fund, LP BizSupplies <$1mm Supplies 454111 Vuico <$1mm Software Development 511210 Promoters of Sports Events w/o Team Championship <$1mm Facilities 711320 Wireless Communications Commerciant <$1mm Equipment 33422 Bynari <$1mm Software Publishers 511210 Mobile Medical Technologies <$1mm Software Publishers 511210 Beverage-based Merchant Republic Holdings Texas, LP Sweet Leaf Tea <$1mm Wholesale 424490 Mobley Oilfield Services >$5mm Specialized Freight 484220 Texas ACP I, LP Quickoffice $1-$5mm Software Publisher 511210 Wireless Communication Commerciant <$1mm Equipment 33422 Whitecap Texas Opportunity Fund, LP HBH Systems I, LP <$1mm Natural Gas (Propane) Distribution 2212 Wilshire Texas Partners I, LLC KJK Unlimited Corp. <$1mm Business Support Services 561499 Data-processing, Hosting and Summit Systems <$1mm Related Services 518210 Fortress Data Data-processing, Hosting and Management <$1mm Related Services 518210 Business Connect <$1mm Business Support Services 516499 6 Number of Jobs Created and Retained and Average Salaries for those Jobs Total Average annual Total Average annual number of wages of jobs number of wages of jobs CAPCO Names of business jobs created created jobs retained retained Accent Texas Fund I. LP Team Championship Intl 0 0 Accent Texas Fund I. LP Commericant* 1.6 $65,690 6.4 $85,125 Accent Texas Fund I. LP Total 1.6 6.4 Aegis Texas Venture Fund, LP BizSupplies 3 $35,000 3 $45,000 Aegis Texas Venture Fund, LP Vuico 4 $56,500 4 $60,000 Aegis Texas Venture Fund, LP Team Championship 0 - 0 - Aegis Texas Venture Fund, LP Commerciant* 1.6 $65,690 6.4 $85,125 Aegis Texas Venture Fund, LP Bynari 0 3 $ 50,000 Aegis Texas Venture Fund, LP Mobile Medical Technologies 0 0 Aegis Texas Venture Fund, LP Total 8.6 16.4 Republic Holdings Texas, LP Sweet Leaf Tea 0 - 10 $46,000 Republic Holdings Texas, LP Mobley Oilfield Services 0 - 49 $52,979 Republic